Everyone envies this water transfer

BLYTHE, CALIF., FARMERS Bob Hull, Danny Robinson and their neighbor producers in the Palo Verde Valley of Southern California knew the day would come when the water they use to irrigate crops would be worth more than the land they farm.

That day is at-hand. And when it arrives — likely before the end of this year — about 100 farmers will pocket checks that will make them the envy of every struggling farmer in California.

The Metropolitan Water District of Southern California (MET) has offered Palo Verde Valley farmers $800 million over 35 years to agree to fallow about a third of the acres in the Palo Verde Irrigation District (PVID) in Riverside County each year so MET can provide more Colorado River water to the thirsty millions in the Los Angeles Basin.

MET is offering a one-time signup incentive of more than $3,000 per acre for the right to divert water used to irrigate almost a third of the valley for use by urban Southern California. And, the huge water consortium is willing to pay an additional $550 per acre annually for fallowing ground. PVID farmers now pay $48 per acre for all the water they need, typically four to six acre feet per year depending on the crop. Irrigation district general manager Ed Smith says PVID uses about 450,000 acre feet annually from the Colorado, and MET wants to have 111,000 acre feet of that available to it annually.

“Farmers will be asked to sign up to sell their water — not the land and not the water rights. No one is selling farmland or relinquishing rights,” emphasized Smith.

For a 1,000-acre farmer who signs up, here's what he'd get under an agreement in principles negotiated by the district and MET: an up front check of almost $1 million and the potential for an annual income of from $33,000 to $160,000 per year for more than three decades, depending on the amount of water MET wants to take from PVID's Colorado River allocation.

In today's blighted agricultural economy, you can almost hear a collective “Where do I sign?” echoing through the sparsely populated desert valley nudged up against the mighty Colorado River.

Not so fast, says Hull and a growing league of fellow PVID farmers. Hull says alfalfa growers don't take the first offer in a hay deal, and he is in no hurry to take this deal.

“Lords knows I can use the money on my farm,” said Hull, who has farmed in the valley for three decades. “But I've got to divorce myself from the current economic situation in farming and look forward. I would just as soon go broke as turn over a really bad deal for the next generation.”

Hull knows the deal will be done. A committee of his fellow farmers hammered it out with farmer interest uppermost. Hull does not want to kill it. He only wants to reduce what he considers the unacceptable risks in the principles of agreement pact negotiated by PVID and MET over the past year.

Hull's does not want more up front money; it's the annual payments he wants changed. He wants an inflation rate escalation tied to the annual payment. “Maybe it needs to be 1 percent over inflation,” he said. MET's initial proposal was for a 2.5 percent annual adjustment of that $550, but negotiations are now under way to modify that. Hull, Robinson and other Palo Verde Valley producers want something less risky than a fixed adjustment rate.

“Maybe we need to reduce up front money and gain some long term stability. A cash flow that increases relative to inflation over time will promote long term farm and community economic strength,” explained Hull, adding, “that up front money is ordinary income, and the taxes will be heavy.

Long-term deal

“Once we sign, there will not be another deal come along for 35 years, therefore, this contract must prove viable for a long time.”

The agreement between PVID and MET is scheduled to be finalized by August. The pact is undergoing an environmental impact review.

The PVID/MET pact is nothing new. Farmers and urban water purveyors are making deals to squeeze every ounce of water out of the available California water supply. There have been underground recharge deals; outright land sales for water rights; conjunctive use agreements.

California urban water providers are getting desperate and creative as they struggle to meet California's rapidly growing future water needs from a dwindling water supply.

And the Palo Verde Valley is one of the plums. It's a farmer-run irrigation operation largely devoid of urban politics because it does not supply drinking water, and there's no ominous environmental issue like the Salton Sea standing in the way. It's also easy to transfer the water form the farmer to the city. MET would simply divert it at the river.

PVID, with Colorado River rights dating to 1877, is a key element in California meeting a federal mandate to reduce its Colorado River use to its entitlement, 4.4 million acre feet annually.

California has been using 5.3 million acre feet, but must get to 4.4 within the next two decades. Almost 3.9-million acre feet of that 4.4 is agricultural water rights.

Only place to look

That means basically urban water suppliers must find 1.5 million acre feet of water just to meet California's current needs, and agriculture is the only place to look, said Smith.

“MET must be very careful in making sure any new water it contracts for, like PVID water, is not construed as new water for new development. It must be water for existing users,” said Smith.

MET came to PVID a year ago. “We knew they were coming because we had heard that they had long been saying elsewhere that they wanted 200,000 acre feet from Imperial Valley and 100,000 from Palo Verde as part of the 4.4 plan,” said Smith.

This is not the first time MET has bought water from PVID. The consortium of 26 cities and water districts that provides drinking water for nearly 17 million people in parts of Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties bought about 25 percent of the district's water in 1992-93, but that was on a two-year deal. It took out of production 25 percent Palo Verde Valley farmland for 115,000 acre feet of water annually.

This time MET wants a 35-year contract. And, the deal was hammered out quickly in the world of California water politics.

“It was worked out for a couple of reasons. One was that there were no attorneys involved in the negotiations. Once deals were struck, they were taken to the attorneys to see if the deals were doable,” said Smith.

Secondly, the fact only farmers were involved in PVID was another plus, believes Smith.

“And finally, I give a lot of credit to Dennis Underwood, who is the former commissioner of the Bureau of Reclamation who now is MET vice president in charge of Colorado River operations,” said Smith. “He is knowledgeable about the operation of the Colorado from his years in the bureau and was a key element in putting the program together.”

Up to growers

When the final package is bundled up, it will still be up to producers to accept or reject it. “If there are not enough growers signing up, there will be no program,” said Smith.

Hull believes there will be a program, and it will forever change the valley and its hub community, Blythe.

“There are people who say when you take land out of production, you are going to hurt the town. I don't necessarily think it will. Instead of selling our least profitable crops from less productive land, the commodity we will sell will be water. With that we will have the money to buy into other opportunities,” he said.

He expects the crop mix to change, away from low value crops like bermudagrass and marginal hay production.

‘Can grow anything’

“We can grow anything here, and I expect farmers to get be even more creative over the next 35 years,” he added.

Hull said there needs to be local research on low water consumption crops, and the MET pact may provide that cash.

“I think there is an opportunity for more cattle grazing. As the public lands become less available for grazing, perhaps we can irrigate the fallow ground once or twice and lease it for cattle,” he said. “Under the current proposal we cannot irrigate the ground set aside for water transfer, but a good contract would provide for negotiations to allow opportunities such as a grazing deal.”

“What makes our deal the envy of everyone is the up front money. What should be envied is we have water to deliver and can deliver it,” said Hull. MET would take it directly out of the Colorado and send it to its 17 million customers.

Saw it coming

The inevitability of a water transfer has long been there for Hull. “I knew this day would come. We bought ground in 1982 for that reason. We paid too much for it, but we bought it because it would be worth more in the future because of the water. The water is now worth more than the land,” said Hull.

Nevertheless, one of his first emotions in hearing about the agreement in principle was depression.

“What I really want to do is farm — grow crops for the whole world to eat. If I wanted to get rich I sure would not farm,” he said.

As a businessman however, he cannot ignore the economic reality of what MET is offering. “You have got to reduce what is on the table to a deal…take the emotions out of it. It is just another deal, but one with 35 years of consequences.”

Nevertheless, it is the emotional envy of every struggling farmer in California because it makes 25 percent of every Palo Verde Valley farm profitable for the next 35 years.

Here's basics of agreement

Here are the basics of the agreement in principle between Palo Verde Irrigation District and the Metropolitan Water District of Southern California.

Any agreement to sign up must include the consent of a leaseholder as well as the landowner.

A base of 6,000 acres would not be irrigated each year of the 35 years.

Parcels may not be idled for more than three years.

Up to a maximum of 26,500 would not be irrigated in any 25 years and up to a maximum of 26,500 acres in any 10 years during the 35-year period.

Metropolitan may increase the non-irrigated area from 6,000 to a maximum of 26,500 acres with one year's notice. The increase would not be irrigated for a minimum of two years and could be decreased with a one-year notice from Metropolitan.

During the 35 years, Metropolitan must average at least 12,000 acres per year non-irrigated. This represents 13 percent of the valley.

Farmer would be responsible for vegetation abatement and dust control and other costs related to the land.

Participants would receive a one-time payment of $3,170 to sign up. A maximum of 29 percent of a landowner/lessee's irrigated land would be eligible for signup.

Landowner/lessee would receive $550 per acre annually for acreage not irrigated. The initial agreement calls for annual payment to be adjusted by 2.5 percent.

Metropolitan would provide $6 million for community funded programs.

Metropolitan would reimburse PVID $100,000 per year in administrative costs.

Metropolitan has budgeted $500,000 for environmental documentation and other activities.

Metropolitan or PVID could terminate the agreement with a minimum of five-years notice on or after July 31, 2032.